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DEPARTMENT OF SOCIAL POLICY AND INTERVENTION May 15, 2015 Who Adjusts? The Economic Crisis and Labour Market Outsiders.

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Presentation on theme: "DEPARTMENT OF SOCIAL POLICY AND INTERVENTION May 15, 2015 Who Adjusts? The Economic Crisis and Labour Market Outsiders."— Presentation transcript:

1 DEPARTMENT OF SOCIAL POLICY AND INTERVENTION May 15, 2015 Who Adjusts? The Economic Crisis and Labour Market Outsiders

2 Evidence from the crisis Labour market outsiders have been most affected in terms of unemploy- ment: the young, those with low skills, immigrants (EC 2010; OECD 2013). Possible explanations: More likely to be fired:  It is easy not to renew temporary contracts and temporary agency work have small or no firing costs.  And firing costs are lower for new hires on permanent contracts due to accumulation of severance payments. More likely to work in low-productivity sectors that are more adversely affected by demand shocks (e.g. construction sector in Spain).



5 LM outsiders were also more adversely affected during the economic recovery

6 Evidence from the crisis, continued Labour market insiders were less affected by the crisis. Older people and those with higher skills did particularly well (EC 2010; OECD 2013) Possible explanations:  Higher firing costs for older workers (EPL, or redundancy payments)  Short-term work schemes benefitted primarily those on permanent contracts in the medium- to high-skill industry.  More likely to work in high-productivity sectors.

7 Policy response: LM regulation  Reregulation of temporary employment in some countries, such as Spain, but also deregulation in e.g. Italy, Lithuania, Slovenia. Overall, not a strong trend in either direction.  Strong move toward decentralization of wage bargaining in bailout countries and through the Euro Plus Pact.

8 Policy response: unemployment benefits  Some countries have made it easier to qualify for benefit (Finland, France, Portugal, Latvia and Slovenia) and have extended duration (Spain, Finland, Romania, Latvia, Lithuania) – (Leschke 2012).  Some countries have decreased benefit duration (Ireland, Denmark, France, Czech Republic, Poland) – (Leschke 2012).  On average the coverage of UB have decreased for young people during the crisis (disclaimer: bad data on coverage).  And, austerity measures in the latter part of the crisis, e.g. in Germany and the UK.

9 LM outsiders and unemployment  Casual unemployment  Cyclical unemployment  Structural unemployment

10 Some proposals for tackling the problems associated with LM outsiders Casual:  Reduce employers’ incentives to hire on non-standard contracts  If no change in welfare systems, introduce minimum duration (12 months)  Eliminate eligibility conditions for unemployment benefits and access to active labour market programmes Cyclical:  Implement reinforced automatic adjusters: increase duration automatically and reserve funds for an increase in high-quality ALMPs Structural:  Improve skill matching  High-quality UB will reduce job displacement

11 Some positive developments New policy direction?  Ease of qualification requirements in some countries  Increase duration of benefits (most however in the first years of the crisis) shows understanding of cyclical unemployment.  Some reregulation of temporary employment. New thinking?  The EU 2020 has put social security coverage for non-standard workers on the agenda.  OECD WP recommends extending coverage for the young.  Deregulation of EPL for temporary employment has a negative effect on employment (OECD 2012, Going for Growth)

12 Some negative developments  The return to austerity measures  Decentralization of wage bargaining  Fiscal pressure. In the Social Investment Package, civil society is argued to have to take a bigger role. This will not work as a substitute to social insurance, e.g. union-run private unemployment insurance in Sweden.  Overall, a stronger focus on structural unemployment, than on casual and cyclical.


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